Although banking across national borders has expanded rapidly, banking regulation remains nationally based. As a result, governments and financial institutions face significant challenges when instability arises. At the Chicago Fed’s International Banking Conference, participants explored cross-border banking issues and ways to improve the current system.

As financial consolidation and international trade have continued to expand in recent years, so too has cross-border banking: International banks based in one (home) country are becoming more deeply embedded in the banking activities of other (host) countries. However, supervision and regulation of these institutions remain, for the most part, nationally based. This can create problems when international banks experience financial difficulties. On October 5–6, 2006, the Federal Reserve Bank of Chicago, in conjunction with the International Association of Deposit Insurers, held its ninth annual International Banking Conference, titled “International Financial Instability: Global Banking and National Regulation.” The conference brought together academics, policymakers, regulators and bankers from more than 40 countries to explore these issues and to discuss how they might be addressed before a crisis event occurs.